Keith Manufacturing Co. v. Butterfield

Case: 19-1136 Document: 40 Page: 1 Filed: 04/07/2020
United States Court of Appeals
for the Federal Circuit
______________________
KEITH MANUFACTURING CO.,
Plaintiff-Appellee
v.
LARRY D. BUTTERFIELD,
Defendant-Appellant
______________________
2019-1136
______________________
Appeal from the United States District Court for the
District of Oregon in No. 3:15-cv-02008-SI, Judge Michael
H. Simon.
______________________
Decided: April 7, 2020
______________________
BRUCE KASER, Vantage Law PLLC, Seattle, WA, ar-
gued for plaintiff-appellee.
SHAWN KOLITCH, Kolitch Romano LLP, Portland, OR,
argued for defendant-appellant.
______________________
Before TARANTO, CLEVENGER, and HUGHES, Circuit
Judges.
HUGHES, Circuit Judge.
Case: 19-1136 Document: 40 Page: 2 Filed: 04/07/2020
2 KEITH MANUFACTURING CO. v. BUTTERFIELD
Keith Manufacturing Co. brought this lawsuit against
Larry D. Butterfield in the United States District Court for
the District of Oregon. Eighteen months after the litiga-
tion began, the parties filed a stipulation to dismiss all
claims with prejudice under Rule 41(a)(1)(A)(ii) of the Fed-
eral Rules of Civil Procedure. Shortly after, Mr. Butterfield
filed a motion for attorney’s fees under Rule 54 of the Fed-
eral Rules of Civil Procedure. The district court denied the
motion because there was no judgment sufficient for a Rule
54 motion. In particular, the district court reasoned that
under the Supreme Court’s decision in Microsoft Corp. v.
Baker, 137 S. Ct. 1702 (2017), a voluntary dismissal with
prejudice is not a “judgment” as required by Rule 54(d).
But in our view, Microsoft is inapplicable because judg-
ment in the context of Rule 54 does not raise the same con-
cerns about finality and piecemeal litigation that animated
the Supreme Court’s opinion in Microsoft. Therefore, we
vacate the district court’s decision and remand for further
proceedings. 1
I
In October 2015, Keith Manufacturing Co. filed this
lawsuit against its former employee, Mr. Butterfield, after
he filed a patent application for what eventually issued as
U.S. Patent No. 9,126,520. Keith alleged that the ’520 pa-
tent was based on inventions made during Mr. Butter-
field’s employment. Keith asserted five claims against Mr.
Butterfield related to the ’520 patent: (1) declaratory judg-
ment of noninfringement; (2) declaratory judgment of inva-
lidity; (3) state-law breach of contract; (4) state-law
misappropriation of trade secrets; and (5) correction of in-
ventorship to add Keith employees as named inventors.
1 Keith has filed a motion for sanctions arguing that
Mr. Butterfield’s appeal is frivolous. The motion is denied.
Case: 19-1136 Document: 40 Page: 3 Filed: 04/07/2020
KEITH MANUFACTURING CO. v. BUTTERFIELD 3
In May 2016, Mr. Butterfield sent Keith a covenant not
to sue and then filed a motion to dismiss the first four
claims. Mr. Butterfield argued that the covenant not to sue
mooted the declaratory judgment claims. He also argued
that both the applicable statutes of limitation and the doc-
trine of laches barred the state-law claims. The district
court granted the motion in part, dismissing the declara-
tory judgment claims but allowing the state-law claims to
proceed.
In April 2017, the parties filed a stipulation of dismis-
sal with prejudice pursuant to Rule 41(a)(1)(A)(ii). Such a
dismissal requires no court order. See Fed. R. Civ. P.
41(a)(1)(A)(ii). The stipulation was silent as to costs and
attorney’s fees. Twelve days later, Mr. Butterfield moved
for attorney’s fees under Fed. R. Civ. P. 54(d), Or. Rev.
Stat. § 20.096, Or. Rev. Stat. § 646.467, and 35 U.S.C.
§ 285.
In its order denying attorney’s fees, the district court
held that Rule 54 requires a judgment, which the Rule de-
fines as “a decree and any order from which an appeal lies.”
Keith Mfg., Co. v. Butterfield, 256 F. Supp. 3d 1123, 1127
(D. Or. 2017) (quoting Fed. R. Civ. P. 54(a)). The district
court then held that the parties’ stipulation to dismiss with
prejudice did not satisfy Rule 54’s judgment requirement
because under Microsoft, a stipulation to dismiss with prej-
udice is not an appealable order. Id. at 1130.
Mr. Butterfield now appeals. We have jurisdiction un-
der 28 U.S.C. § 1295(a)(1).
II
In cases involving questions of law not assigned to the
Federal Circuit, we apply the law of the regional circuit.
Panduit Corp. v. All States Plastic Mfg. Co., 744 F.2d 1564,
1574−75 (Fed. Cir. 1984). Though the Ninth Circuit re-
views a district court’s decision to deny a motion for attor-
ney’s fees for abuse of discretion, it reviews questions of law
Case: 19-1136 Document: 40 Page: 4 Filed: 04/07/2020
4 KEITH MANUFACTURING CO. v. BUTTERFIELD
underlying the district court’s decision de novo. Skaff v.
Meridien N. Am. Beverly Hills, LLC, 506 F.3d 832, 837
(9th Cir. 2007) (reviewing the district court’s decision on
standing de novo); see also Easley v. Collection Serv. of Ne-
vada, 910 F.3d 1286, 1289 (9th Cir. 2018) (“[W]hen the
principal issue raised on appeal is legal in nature, [the
Ninth Circuit] review[s] the district court’s award de
novo.”). Therefore, here we review the district court’s ap-
plication of Microsoft de novo.
III
We begin our analysis with the requirements of
Rule 54. A claim for attorney’s fees “must be made by mo-
tion unless the substantive law requires those fees to be
proved at trial as an element of damages.” Fed. R. Civ. P.
54(d)(2)(A). Rule 54 motions must: “(i) be filed no later
than 14 days after the entry of judgment; [and] (ii) specify
the judgment and the statute, rule, or other grounds enti-
tling the movant to the award.” Fed. R. Civ. P.
54(d)(2)(B)(i)–(ii). “‘Judgment’ as used in these rules in-
cludes a decree and any order from which an appeal lies.”
Fed. R. Civ. P. 54(a).
The issue the district court considered here is whether
the stipulated dismissal with prejudice constitutes a judg-
ment for the purposes of Rule 54. Although Rule 54(d)
“posits a relationship between a judgment and its appeala-
bility,” Castro Cty., Tex. v. Crespin, 101 F.3d 121, 128
(D.C. Cir. 1996), this relationship exists for the prudential
purpose of minimizing piecemeal appellate litigation, not
because a shared technical construction mandates the re-
lationship. Rule 54(d)(2)(B) was promulgated to “enable[]
the court . . . to make its ruling on a fee request in time for
any appellate review of a dispute over fees to proceed at the
same time as review on the merits of the case,” Fed. R. Civ.
P. 54 advisory committee’s note to 1993 amendment, in ser-
vice of “minimiz[ing] the need for piecemeal appeals,” see
Weyant v. Okst, 198 F.3d 311, 314 (2d Cir. 1999).
Case: 19-1136 Document: 40 Page: 5 Filed: 04/07/2020
KEITH MANUFACTURING CO. v. BUTTERFIELD 5
Similarly, the finality requirement of 28 U.S.C. §§ 1291and 1295 is “designed to guard against piecemeal appeals.”
Microsoft, 137 S. Ct. at 1707. “[F]inality is to be given a
practical rather than a technical construction.” Eisen v.
Carlisle & Jacquelin, 417 U.S. 156, 171 (1974) (internal
quotation omitted). The “final decision” inquiry of §§ 1291
and 1295 “requires some evaluation of the competing con-
siderations underlying all questions of finality—the incon-
venience and costs of piecemeal review on the one hand and
the danger of denying justice by delay on the other.” Id.
(internal quotation omitted).
In Microsoft, the Supreme Court reasoned that allow-
ing a class-action plaintiff to manufacture finality using a
voluntary dismissal with prejudice would allow her to cir-
cumvent § 1291 by “stopping and starting the district court
proceedings with repeated interlocutory appeals.”
137 S. Ct. at 1713. It would also contravene the reasoned
decision-making behind, and “careful calibration” of,
Rule 23(f). Id. at 1714. Finally, it would discriminate
against defendants, who may want to immediately appeal
an adverse certification ruling as much as any plaintiff but
would be unable to do so. Id. at 1715.
Given their common purpose, it is unsurprising that
“judgment” in the context of Rule 54 is often congruent to
a “final decision” under § 1291. See Crespin, 101 F.3d at
128. They are not, however, equivalent. The definition of
judgment in Rule 54 indicates that some non-appealable
orders can still constitute a judgment. Rule 54(a) states
that judgment “includes . . . any order from which an ap-
peal lies,” (emphasis added), not that judgment is any order
from which an appeal lies. This inclusive language reveals
that Rule 54 “judgment” includes more than just appeala-
ble orders.
Although the scope of Rule 54 “judgment” is broader
than a § 1291 final decision, their shared purpose and gen-
eral congruity mean that § 1291 can still inform the proper
Case: 19-1136 Document: 40 Page: 6 Filed: 04/07/2020
6 KEITH MANUFACTURING CO. v. BUTTERFIELD
scope of Rule 54. But the district court’s reliance on Mi-
crosoft’s § 1291 analysis went too far because the concerns
that animated the Supreme Court’s Microsoft decision are
not present here. First, treating a voluntary stipulation
with prejudice as a judgment for purposes of attorney’s fees
under Rule 54 will not invite parties to engage in piecemeal
appellate litigation. The joint stipulation means that, ex-
cept under rare circumstances, there will not be an appeal
on the merits; only the attorney’s fees issue remains. Sec-
ond, because this case is not a class action, it will not un-
dermine class action procedure. And because both parties
can move for attorney’s fees, permitting a Rule 54(d) mo-
tion for attorney’s fees after a stipulated dismissal will not
affect the overall balance of litigation.
The Tenth Circuit reached a similar conclusion in
Xlear, Inc. v. Focus Nutrition, LLC, 893 F.3d 1227,
1235−36 (10th Cir. 2018), when it considered whether Mi-
crosoft should be extended to preclude attorney’s fees after
a Rule 41(a)(1)(A)(ii) stipulation of dismissal. The Tenth
Circuit also found Microsoft inapplicable, reasoning that it
“address[es] the narrow situation where a hopeful class ac-
tion plaintiff uses a stipulation of dismissal as a tactic to
overcome the limitations placed on appellate jurisdiction
by 28 U.S.C. § 1291.” Id. at 1236.
Keith raises additional grounds for affirming the dis-
trict court’s decision, including the propriety of awarding
fees in this case and whether a self-executing stipulation
that the court plays no role in entering constitutes a judg-
ment. We decline to address these grounds at this time
because they were not part of the district court’s holding.
We have considered Keith’s remaining arguments and
find them unpersuasive. We vacate the judgment of the
District Court for the District of Oregon and remand for
further proceedings consistent with this opinion.
VACATED AND REMANDED